China's foreign trade hit a record $1.76 trillion last year while the trade surplus widened to $177.5 billion, according to official figures.

However, experts predict that the trade volume and the surplus will rise by a modest 15 percent and 13 percent this year, compared with 23.8 percent and 74 percent for last year.

Exports in 2006 rose 27 percent year-on-year to $969 billion while imports climbed 20 percent to $791.6 billion, the General Administration of Customs said yesterday.

Export growth dropped 1.2 percentage points from 2005 while imports increased 2.4 percentage points.

The total trade volume grew 23.8 percent from a year earlier the fifth year in a row that it has been above 20 percent.

Trade with each of the top three partners, the European Union, the United States and Japan, exceeded $20 billion.

The surplus widened to a record $177.5 billion in 2006, up 74 percent from a year earlier. A countrywide breakdown is not yet available.

In a bid to counter the mounting pressure of increased loans from the trade surplus, the central bank had to order commercial banks to set aside more money as reserves from January 1 for the fourth time in seven months.

The regulator is likely to ask commercial banks to increase reserves another four to five times this year, reports said.

The record trade surplus last year also led to calls from the US and the EU for Beijing to take measures to balance trade.

However, Chinese economists predicted the country's trade surplus is not likely to narrow substantially this year as it is a result of its strength as a global manufacturing center. But the growth in surplus is expected to slow, given the government's policies to restrict exports and encourage imports.

Despite the dazzling growth in the trade volume, traders are now facing "worsened" trading conditions, Customs Director Mu Xinsheng said in a recent interview.

He explained that costs of exports keep increasing not only because of price increases in resources, labor and land but also because the appreciation of the renminbi will further blunt the competitive edge of "Made-in-China" products.

The nation has also become the biggest victim of international trade protectionism with developed countries imposing an increasing number of dumping charges and erecting technical trade barriers against Chinese products.

"It will be more difficult for Chinese exporters to enlarge their market share in some major developed markets, such as the US and the EU, during the country's 11th Five-Year Plan (2006-10)," Mu said.

The Ministry of Commerce has predicted the country's trade volume would grow by 15 percent to $2 trillion this year.

The ministry stressed that although China is seeing big surpluses in the trade of manufactured goods, it also has a deficit in services which increased by 44 percent year-on-year to $5.7 billion in the first six months last year.

(China Daily 01/11/2007 page2)